Office of Personnel Management Ruling On Charity Drive Draws Protest

March 12, 2007 -- Stephen Barr - The nation's
largest workplace charity drive -- the Combined Federal Campaign conducted in
government offices -- has tossed out a key rule, and that has prompted protests
and appeals to members of Congress from nonprofit groups.

The controversy involves a decision by the Office of Personnel Management, which
administers the charity drive, to drop a requirement that charities spend no
more than 25 percent of their revenue on fundraising and other overhead
expenses. Charities that exceeded the cap were required to give the OPM a reason
and come up with a plan to reduce overhead to stay in the campaign.

Sen. Charles E. Grassley (R-Iowa) does not like the rule change. "OPM is now
taking steps that potentially undermine the CFC, discourage charitable giving by
federal employees, and harm our nation's charitable sector," Grassley wrote in
letter to President Bush, sent Friday.

Grassley noted that the Internal Revenue Service recently drafted "best
practices" for charities to help them improve their accountability, but "OPM is
sending exactly the opposite message -- that there is no need for charities to
be accountable to the public trust that comes with receiving charitable
donations."

The OPM proposed the change in how the charity drive operates last summer and
dropped the 25 percent requirement in November. Enforcing the overhead
limitation had become an "administrative burden on OPM staff," in part because
of lawsuits from charities that failed to qualify, the OPM said in the Federal
Register.

James S. Green, associate general counsel at the OPM, said the charity campaign
will continue to calculate overhead rates and publish the information so that
federal employees can determine for themselves whether a charity has reasonable
administrative and fund-raising expenses.

The OPM will advise employees that overhead costs above 35 percent should be
seen as problematic, he said. That standard, he noted, is used by the Better
Business Bureau Wise Giving Alliance. Green also said more than a dozen other
rules will help keep "fly by night operations" out of the campaign.

Federal employees and military personnel pledged $268.5 million to the CFC in
2005, the latest tally available. Even though the number of government workers
making donations has declined in recent years, the amount of their pledges has
increased. The drive is of huge importance to Washington area charities, which
received $57.6 million from federal employees in 2005.

It's clear, however, that many charities -- small and large -- are uncomfortable
with the rule change. Global Impact, which represents U.S-based international
charities, calculated that 91.8 percent of the comments received by the OPM on
the change were in opposition.

The 25 percent rule "does say to people that they want to support organizations
that are trying to put the money into services and not other things," said
Christel Nichols, president of the House of Ruth, which helps homeless women in
the District.

Added Father John Adams, president of So Others Might Eat, which helps the poor
and homeless, "It doesn't sound like good business practice to lift the
overhead."

H. Art Taylor, president of the Better Business Bureau Wise Giving Alliance,
fears the OPM has made a bad decision. "This opens up the door for the campaign
to receive charities that frankly are just set up to raise funds and not do much
in terms of charitable services," he said.

Stephen F. Ristow, executive vice president of Global Impact, said as government
employees see charities entering the program with higher overhead costs,
"confidence in the campaign will go down."

Not all federal employees have access to computers or will recognize the
importance of checking and comparing overhead rates, said Kalman Stein, vice
chairman of the National CFC Committee, which represents a number of charities.
"I think they have a greater responsibility to their employees than caveat
emptor," he added.

Although the OPM announced it was rewriting the charity campaign rules last
year, Neal Denton, vice president of government relations and public policy at
the American Red Cross, said the nonprofit community feels rushed by OPM's
decision to implement the new rules this month, for the 2007 fall campaign.
"This was done very quickly without careful analysis and without a lot of
deliberation," he said.

Reps. Henry A. Waxman (D-Calif.) and Thomas M. Davis III (R-Va.), leaders of the
House Oversight and Government Reform Committee, also have concerns about the
new policy and will be sending a letter today to the Bush administration, a
committee spokeswoman said.

Grassley, in his letter to Bush, said he is worried that the charity drive is no
longer a priority at the OPM, which oversees federal employee health and
retirement programs. He asked Bush to consider transferring the Combined Federal
Campaign to the Corporation for National and Community Service, which supports
volunteer programs, saying that "would seem to be a more natural fit."